Blogs

In my last article I mentioned the first key point with a health savings account (HSA) that in order to use the money to pay for expenses, the expenses MUST occur after the account has been opened. Not necessarily fully funded because you can deposit money and and reimburse yourself after the fact. You just have to have opened the account prior to incurring the expense. And the account has to be opened after you have the appropriate insurance plan, as a reminder.

Other things to consider when opening an HSA:

* Once account or two? Well, only one name can go on the account. For a married couple or domestic partners, once account may be okay. But if both are over age 55, and they are both on an HSA eligible plan, consider opening separate accounts. The reason is after age 55, people can deposit an extra $1000 per year on top of the $3050 maximum for 2010. If you only have one account, only the person on the account can do that, so consider talking to your tax professional for the best route. I don’t consider an HSA the first place to put money, but if you’ve maxed out all your other pre-tax options and you are looking for another place to put some money that can grow tax FREE, this can be an option.

* Fees–You really have to look at this. If you are like most people and you don’t want to dump a large amount in right off the bat, fees of $3-$10 a month will eat into your principle. Many accounts offer low or no monthly fees. You also want to look and make certain there are no ‘per transaction’ fees.

* Investment options–As your account grows, hopefully, because you’ve been able to put money in it and not had sizable expenses, some people want their money to get some growth. Many accounts offer mutual funds after you reach a certain balance. But be sure you aren’t gambling with the rent money, so to speak.

So these are the main things people have questions about, or don’t know to ask. Many banks, credit unions and others are now offering HSAs. You can go to your regular bank but again, look at the fees in particular. If you want to see what’s available, go to HSAFinder.com. This web site is like a central repository that lists many entities that offer HSAs, and I go there regularly to look.

Remember, an HSA is like most other accounts, in that you can transfer it to another HSA if you find better rates. Just don’t have the old agency give you the check to redeposit, as that might trigger fines and penalties you shouldn’t have to pay.

One last thing–Happy Birthday Mr. Obama–talk about a lonely job right now!

Health Savings Accounts (HSAs) have been a great way to go to ”self fund’ eligible health care expenses. You can even use it for most vision and dental expenses even if you don’t have vision or dental insurance.

But the reason you have an HSA usually is for the fact that the money you put into the HSA is tax deductible. if you had a sizable expense, wouldn’t you like to be able to maximize the tax benefit? Here’s something most people miss. First, what most people do know is that in order to have an HSA, you have to have a qualified high deductible health plan. Once you have that approval or enrollment, then you can open the HSA.

Here’s what catches most people off guard though. There are different ways to fund your HSA, either by putting a full contribution in, maybe electronic fund transfer of a couple hundred a month or my personal favorite, I’ll anticipate an upcoming expense, approximate what it will cost and deposit that amount. But if you have an expense that catches you with a low balance in your HSA, you can pay for it in a regular way, credit card or check and reimburse yourself.

But to legitimately pay for an expense out of your HSA by any of the aforementioned ways, the account MUST be established prior to incurring the expense. Most people don’t know that, they think it just has to happen after you have the health plan. This basically is an honor system, meaning that generally no one is looking over your shoulder on this but if you faced an IRS audit, you do need to keep your receipts for expenses and you’ll potentially need to prove that the medical issue occurred after the HSA was established.

That’s why I tell my clients who are wavering as to whether or not they want to establish the HSA to open one as soon as you are eligible, then just put some nominal amount in it. That way you can add to it later in case something major happens. This came to light when one of my clients called and asked me where again to open their HSA. The husband had an emergency, they were going to open the HSA, drop the maximum amount into it and pay the hospital bill. Unfortunately, that wasn’t going to work.

So set up your account. Lots of banks, credit unions and others offer them. For a nice clearing house web site that lists who is offering them, go to www.hsafinder.com. But be sure to verify the details on the account, because sometimes this site misses a couple of things.

A few days ago I wrote about how convoluted the small business tax credit for group health plans was going to be. Here’s a reminder.

Now here’s a commentary on why the bill was bad for small business, and a very eloquent one at that. The National Federation of Independent Business’s (NFIB) president, Dan Danner, points out some very strong points as to why small business is going to get very little help through this, but the government will gain a fair amount in taxes.

Here is one of the worst points:

“This law is death by a thousand cuts for small business owners. According to the Congressional Budget Office (CBO), the overhaul will cost about $115 billion more than first projected, bringing the total to more than $1 trillion. Small businesses will also now have to deal with an onslaught of new taxes and burdensome paperwork.”

So basically, in California, we’re already taxed into oblivion seemingly, so this isn’t going to help. Rather than repeat his points, PLEASE click on this link and read. Almost better than the article itself, click on the tabs for ‘Comments.’

Not many people want to see folks go without health care, certainly including me, but I’d like to see them have jobs too. Having a job means an income, which means food and other basic necessities. This will only hasten the demise of local and small businesses that are the lifeblood of the economy rebounding. This may not seem like an ‘insurance’ related article, but kill off small business, you kill off the economy. Kill off the economy, and there’s no tax money to fuel your benevolent attempt at reform. So no improvement in the ‘health care’ situation. No, I don’t have the answer, but I know this isn’t it. Because with all of this, people aren’t going to be buying health insurance, that’s for sure!

You can’t pay for health care or insurance if there’s no money in California. Remember the phrase after NAFTA passed, ‘that sucking sound you hear is jobs moving south of the border?’ Now that sucking sound is jobs moving to Oregon, Arizona and Nevada. Along with their tax revenue!

With all the discussion around health care coverage, the cost, who’s good and who’s not, I like to see my clients get the most they can from their health insurance.

The big tip–the excitement–drum roll please…..You want to use contracted providers whenever possible. With HMO (health maintenance organization) plans you don’t really have a choice. You have to see doctors contracted with the carrier or your care isn’t covered except in case of an emergency.

PPOs, preferred provider organizations, you have the option of using providers that are or aren’t contracted. If you use a doctor, hospital, outpatient surgery center, whatever, that IS contracted with your insurance carrier you get the benefit of a contracted rate. So even if you are paying for the care, like when you haven’t met your deductible yet, you get the benefit of the contracted rate, also known as a discounted rate or negotiated rate. This can really help–I had blood work that I was billed over $400 for last year, and once the negotiated rate was applied, it cost about $100. I still had to pay the bill, but would the lab have knocked it down 75%? I think not.

So either go to the web site of your insurance company (they all have them) or call them. You can also ask the office or hospital you are going to be going to if they are contracted but be sure to specify if you have an HMO or PPO plan. Just asking ‘do you take Aetna’ won’t help if you have an HMO and they only accept PPOs.

It may seem like a little thing, but believe me, it will make a difference.

As with most things that came out in the health care reform bill, the devil is in the details. The small business tax credit most assuredly included. I am not a tax expert by any means, but my wonderful tax guy, David Marton in Westlake Village, passed this on to me from the Kiplinger Tax Letter. And here is an article with various pieces of information you may find helpful.

So, you will get a 35% tax credit if you have 10 or fewer employees and the average yearly wages are less than $25,000. If you are a tax exempt organization, the credit is capped at 25%. And the higher the average wages, the more full time employees you have, the credit decreases. For example, the Kiplinger letter give the example that if you have 15 employees, averaging $35,000 per year, the credit goes down to 9%. And it’s gone completely if you have more than 25 full time employees or wages average more than $50,000.

And god forbid our government should stop there as far as complexity. Guess who is NOT eligible to be included in this? Partners, sole proprietors, 2% owners of S corporations and 5% owners of C corporations. On top of that, Family Members–including kids, their spouses, spouses and their parents, grand kids, parents, siblings and their spouses, nieces, nephews, aunts and uncles. I didn’t see anything about partridges in pear trees, but I bet they’re excluded too. Then there’s rules around seasonal workers, part timers, it just goes on and on.

Oh Yeah–employers must be contributing a minimum of 50% of the employee premium. Most do, but several of my clients have a fixed amount they contribute per employee, and sometimes that doesn’t calculate out to be 50%.

Then the amount of the credit you take decreases the amount of the deduction you can take for paying premiums. That makes sense, otherwise you’d be ‘collecting’ twice.

And there’s more, so I urge you to contact your tax professional to see how this works for you–or doesn’t–before you make any decisions about your benefit offerings and how they will work with the new credits. And of course, they phase out over the next few years. Probably out the time we figure it out.